Investment Institute
Monthly Market Update

Monthly update on Asia & China Market: A modest, uneven recovery

  • 23 June 2022 (5 min read)

In this video, our Senior Emerging Asia Economist Aidan Yao shares his latest outlook on the Chinese economy, against the backdrop of uneven recovery.


Full transcript:

Aidan: Hello, welcome to our monthly video. My name is Aidan Yao. I’m the senior emerging Asia economist at AXA Investment Managers.

The latest economic data of China shows the worst of the COVID shock has passed, although the recovery so far has been modest and uneven, and still faces risks of setback.

May activity data beat market expectations across the board, and showed a notable improvement in sequential growth after April’s slump.

However, not all parts of the economy performed equally, meaning that the recovery was multi-speed.

What does an uneven recovery mean?

Similar to early 2020, we saw:

  • Supply recovering faster than demand
  • Goods production recovering faster than services production
  • Exports recovering faster than domestic activity
  • Investment recovering faster than consumption

Overall, it is clear that the removal of supply-chain and logistics bottlenecks – on the back of Beijing’s recalibration of COVID policies – has played a critical role in supporting the economic recovery.

What is our latest outlook on China growth?

Looking ahead, plenty of challenges remain. Given the nascency and fragility of this recovery, we think Beijing needs to keep its foot on the pedal to assist a full restoration of economic normality. Fiscal policy has already started to boost infrastructure investment, but broader supports are needed to repair confidence among COVID-hit businesses and households via tax/fee reduction and consumption supports.

The housing market has shown some tentative signs of stabilization lately as well, but ince again, a meaningful recovery will require more policy easing.

These easing of economic policies, together with a further fine-tuning of COVID policies, in our view, will help to pave the way for an economic recovery in the second half of year. Our updated projection now has full-year economic growth at 3.6%, which still, sits below the current consensus forecast at 4.5%.

Thank you very much and stay safe.

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